Interest rate pricing was all over the place last week. On Monday, interest rates hit their lowest levels in about 3 months. Interest rates went higher the rest of the week until the January employment report was released on Friday. For the third month straight, job creation was lower than forecasts. This would normally cause a big movement for better interest rates but the improvement wasn’t as much as expected.

Overall on the week, the Mortgage Backed Security market traded lower – 6 bps. When the dust settled, interest rate pricing remained in a narrow range and mortgage interest rates are basically where they were at the beginning of last Monday.

In 2014, interest rates have fallen at some of the fastest levels in the past 2 years. The main reason is usually interest rate pricing fluctuates more going up and down, but interest rates have improved for 5 week straight weeks before last week.

There is some concern that the lower trend has come to an end with the market not moving as much as expected with a poor employment report. It’s tough to call right now, but I see interest rates remaining fairly stable for the time being. There is still a limit to how much interest rates can really improve with the FED tapering. The interest rates in the low 3%’s won’t be back, but you could see interest rates going a little bit lower than today’s levels.

This week Janet Yellen will make her first testimony to Congress. Not much new information is expected to be deemed from this testimony, but it will be her first time before Congress as the new FED Cheif.

Interest rates continued their hot streak ahead of the FED statement on Wednesday. Mortgage interest rates pushed to new lows in 2014 with the stock markets having a big sell off and investors transferring money into safer investments.

This improvement in rates could be temporary depending on if the stock markets bounce back. I would strongly recommend locking as these are the lowest rates I have seen in close to 2 months.

The Federal Open Market Committee (FOMC) will release a statement on Wednesday that will likely have a major impact on rate pricing. Experts are still torn on whether the FED will keep current bond purchasing levels or reduce them another 10 million.

If the FED reduces its bond purchasing again, expect to see rates bounce back higher.

On Friday, the December employment report was released. Analysts predicted Non Farm Payroll Jobs to increase by 196,000 and the unemployment percentage to remain at 7%. The analysts vastly overestimated the increase, causing a huge movement in the bond markets and pushing rates lower by approximately .125%.

Non Farm Payroll jobs only increased by 74,000. Although the unemployment percentage dropped to 6.7%, much of that was due to people leaving the work force. Only 62.8% of the population is employed, which is the lowest level since 1976.

This is welcome news for rate watchers after interest rates have steadily climbed for weeks straight. With the FED tapering, the long term outlook is still for interest rates to climb higher. Now is a good time to consider locking in while price is improved.

As many have heard by now – The FEDERAL RESERVE BOARD finally decided to taper their bond purchasing program – capping months of speculation on when the move would take place. The FED will reduce it’s bond purchasing by 10 million per month. This relatively small taper as well as the market already taking into account that a taper would happen helped rates not go through the roof. Still mortgage interest rates are much higher than most have become accustomed to and will head higher in 2014.

GSE FEE INCREASE IN 2014:

Along with more tapering likely coming from the FEDERAL RESERVE BOARD in 2014, the GSEs FANNIE MAE and FREDDIE MAC announced fee changes to lenders last week.

These fee changes will raise the rate for most borrowers .125% – .375% once they hit lender rate sheets. After announcing the Fee change, FHFA director Mel Watt pulled back the implementation, announcing a delay in the fee change until he is able to further determine if this plan of action is the best way to move forward.

So at this point, the fee changes which raises the fees FANNIE MAE and FREDDIE MAC charge lenders to buy their loans is delayed after most expected these changes to hit lender rate sheets in January 2014.

If/when these changes going into effect – they will dramatically raise rate/borrower costs for most borrowers. Loan level pricing adjustments are certain characteristics of a customer’s loan that cause the loan to be more expensive. Some of the changes announced:

– Highest qualifying credit score will now be 800, currently any borrower with a 740+ credit score will get best mortgage pricing – Cash out loans will increase in rate/costs – Lower credit score borrowers will increase in rate/costs – Investment property loans will increase in rate/costs

Below is a chart of the proposed loan level pricing adjustment for Fannie Mae and Freddie Mac in 2014. Below is also a great article explaining the Fee changes:

All eyes are on the FED and The FOMC meeting this week. The FOMC starts their meeting on Tuesday and will release their statement at 2 pm Eastern on Wednesday.

There is more and more speculation that the FED could taper at this meeting – many experts now calling it a 50/50 proposition. Some prognosticators are actually predicting the FED to taper like the opinion below:

“We now look for the Fed to do something meaningful at the December 18 meeting,” wrote Michael Moran at Daiwa Capital Markets America in a note. “We view the announcement of a reduction in asset purchases as the most likely outcome; absent this, we expect some type guidance on the FOMC’s plans for the effort.”

If the FED tapers, the markets will also be looking at how much they will pull back on their bond purchasing budget. Any sort of taper will likely mean a large rise in rates.

With interest rates at around 4 month highs – I am still suggesting locking before the meeting. If rates drop significantly after the announcement (unlikely) – rate float downs are available when rates drop .25% with the same costs.

The interest rate market had quite the week last week. Rates rose everyday from Monday through Thursday before the important November employment report. Then something weird happened.

Job creation beat their forecasts, The unemployment rate dropped .2% – this would usually cause rates to rise fast, but it didn’t. Rates actually improved a little bit on Friday and also on Monday. Still, the Mortgage Backed Security Market closed the week trading down – 69 bps, pushing rates to their highest levels in months.

With the majority of economic reports showing positive gains – more and more experts think the FED could taper their stimulus package in their meeting next week. I don’t expect rates to change much until then.

Rates are still taking on the outlook I have talked about for months – rates really have no where to go but higher. Any improvement we see is not substantial because the FED taper is looming.

Those still waiting for rates to dramatically drop will likely be waiting forever. I recommend locking on a refinance if it’s beneficial as even these higher rates likely won’t be around much longer.

BEST VALUE OF THE WEEK:

15 Year Fixed at 3.5% with 0 points 10 Year Fixed at 3.25% with 0 points

INTEREST RATES TRENDING UP / MONDAY IS LAST DAY FOR HOLIDAY RATE SPECIAL

December 2nd, 2013

I hope everyone had a great Thanksgiving!! Interest rates rose for the second straight week with the Mortgage Backed Security market closing down – 39 bps.

The MBS market is currently down almost -70 bps over the past 2 weeks and interest rates are around 2 month highs. Still they are fluctuating in the same range they have for most of the past 5 months with 30 year fixed rates in the 4.125% – 4.375% range.

Over the long term, rates have been very stable and they will likely stay in a tight range unless something happens with the FED and their bond purchasing stimulus.

The FED meets again this month, but most don’t expect the FED to taper their stimulus until 2014.

HOLIDAY INTEREST RATE SPECIAL

My Holiday interest rate special ends at 4 pm Pacific on Monday. In order to get the discount, I must approve loan and order appraisal by that time.

The discount is:

.5 points off all CONFORMING, FHA, and VA loans.

.25 points of all HIGH BALANCE CONFORMING LOANS

The pricing below includes the discount, but all pricing will move up after Monday. Please contact me on Monday if you would like to lock in before this special ends.

In order to drum up business for the end of the year, My company is offering the following Holiday Rate Special:

.5 point discount on – Conventional, FHA, and VA loans

.25 point discount on – High Balance Conforming Loan

This special is available for loans locked and appraisals ordered by the 1st week of December.

This is one of the best deals on the market – please contact me if you would like to take advantage of this Holiday Special before it’s gone.

INTEREST RATE MOVEMENT

Interest rate pricing rose quite a bit last week through Wednesday – hitting some of the highest levels in the past 2 months after a 2 day bond sell off. Fortunately, the Mortgage Backed Security market rebounded on Thursday and Friday – closing the week with rates rising close to .125% from the week before.

Mortgage rates ended last week slightly higher, but have improved on Monday taking some of the losses back.

On Wednesday, the FED announced that they would not taper their bond purchasing program. Most did not expect the FED to taper, so this wasn’t a huge surprise. The FED did take out some verbiage in their statement though, which caused some MBS investors to sell off. Normally we would expect rates to improve with this announcement, but that did not happen. The FED will meet again in December.

We have a big week in rate effecting news this week. The Third Quarter US GDP will be released Thursday and the October 2013 Employment report will come out Friday. The employment report will be very important for the direction of interest rates over the next month. If job creation is lower than expected, rates will improve. If job creation is above expectations, expect rates to rise.